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Sun, 22nd January 2017

Anirudh Sethi Report

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What will drive political uncertainty in 2017?

As 2016 draws to a close, a sense of unease is gripping many commentators as they look ahead. This year brought victories for Brexit and Donald Trump. The outcome of both votes were largely unexpected. What will 2017 bring? The EU is facing three, or even four, elections in major member states. The Netherlands, France, Germany and possibly also Italy will go to the polls. The outcome in all four elections is far from certain at this stage. Indeed, voting behavior seems to have become difficult to predict.

Economic and sociological research points to a number of different factors provoking these recent results. The debate is broadly about whether it is economic issues such as income inequality, cultural issues such as a rejection of equal rights for women, minorities and gay people, or factors relating to citizens’ perceived loss of control over their destiny that has driven people to support populist candidates and causes.

 At first sight, the economic factors seem to have played a strong role. The vote for Brexit predominantly came from the countryside, where GDP per capita levels are significantly lower than in the cities. Moreover, income inequality levels are much higher in the United States and the U.K. than in continental Europe. And indeed, one can show that the Brexit vote is significantly affected by regional income inequality though the effect may not be very large.

The second explanation is a rejection of progressive cultural norms. An interesting study by Ingelhart and Norris emphasizes very much this aspect. They offer evidence that the recent protest votes are a cultural backlash against progressive values. And indeed, discourse especially on social media has totally changed. Unfortunately, it seems to have become widely acceptable to talk of white supremacy and engage in racist discourse.

Finally, there is the question of loss of control. In a striking survey by YouGov, Trump voters are shown to strongly endorse values such as respect for authority. And their votes were also very much influenced by concerns over immigration. Similarly, the vote for Brexit was also driven to a great extent by immigration fears.

If one buys primarily into the economic story, Europeans should not be too worried about next year’s elections. After all, the continental European countries have the largest welfare states in the world and inequality levels are comparatively low. To be sure, youth unemployment levels in particular are still worryingly high and need to be urgently addressed. But elections are typically won among older voters in our aging societies. Moreover, job creation is now robust.

But if one puts more emphasis on the cultural aspects, and in particular on the sense of losing control, then the outcome of elections in Europe looks less certain.

The recent terrorist attack in Berlin, most likely executed by a refugee who had applied for asylum, could drive a further shift in the mood among Germans. On the other hand, the cultural values of tolerance, respect and rationality are quite deeply rooted in today’s Germany. The race for the German chancellery is still wide open.

In France the conservative candidate couples traditional cultural values with far-reaching proposals to reform the French state and its economy along liberal lines. Will this prove a winning combination? The far-right candidate offers an anti-foreigner ticket and economic proposals that could take France out of the euro and do great damage to the country’s economic well-being. Again, the outcome is uncertain.

Despite their differences, all countries going for election share one common agenda: they must prevent uncontrolled immigration as experienced in some periods of 2015. Building capacities for border control and intelligence to counter terrorism will be fundamental for the future of Europe. 2017 will be one in which voters will give their verdict on whether European and national policymakers have delivered. But these electoral battles will go well beyond immigration and inequality. Cultural factors seem to be more central than most economists would like to accept. It is in this arena where citizens, not experts, will have to engage to sustain liberal democracies.

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